VCs Are ‘Knowledge Gatekeeping,’ And It’s Holding Back Diversity

By Eleanor Kaye

Despite repeated commitments to “do better,” venture capital continues to be dogged by poor diversity and inclusion: Black investors make up an estimated 4% of venture capitalists in the U.S., and in Europe, women only represent 15% of general partners.

Studies show that people hire and back those who remind them of themselves. This “affinity bias” creates a vicious cycle. With a stark lack of diversity among VCs, is it any surprise that all-male, all-white teams remain vastly more likely to attract funding?

To add insult to injury, VCs are unwittingly fueling this status quo through “knowledge gatekeeping” — holding information and power close to their chests. This is preventing people with overlooked and underestimated backgrounds from accessing VC careers, thereby cementing the inequalities we see around who receives funding.

Extensive jargon

Eleanor Kaye, executive director of Newton Venture Program

VC knowledge gatekeeping takes many forms. One of the biggest is jargon. “Carry,” “secondaries,” “LPs,” “bridging” — for someone new to the startup world, it’s overwhelming.

And yet very little is done to boost access to VC education. We don’t teach it in schools, nor routinely at the undergraduate level. This creates an intimidating barrier for those looking to break in. The result? The VC talent pipeline is stacked by people who have organic access to knowledge gained through parents, peers or attendance at certain institutions.

When my organization, the Newton Venture Program, launched our free ‘Foundations’ program earlier this year, more than 1,000 people signed up in a month. There is strong demand for entry-level resources; we simply need more people willing to create them.

Exclusive spaces

Another form of gatekeeping is the exclusivity of the networks and communities across VC.

Reminiscent of high school parties, lots of deal-making and knowledge-sharing happens in invite-only spaces (digital and IRL), or between industry peers with existing relationships.

This cross-firm collaboration is an integral part of VC, but it can also operate to the detriment of aspiring investors. (See also: Investors’ over-reliance on the warm intro and its impact on founder diversity.)

For those who don’t have an existing network, it’s tough to break into what can feel like a clique. And it’s those from overlooked and underestimated backgrounds who lose out. If existing members of the VC club fail to pull up aspiring recruits and invite them to the proverbial party, we will never truly diversify the industry.

Rigid resumés

Venture is a tough industry to crack. There are a limited number of funds, most with small teams, and competition is fierce. But VCs’ overreliance on resumé hallmarks are hurting diversity and excluding exciting talent.

According to one analysis, 42% of adverts for VC internships mention engineering degrees and 20% mention computer science — both male-dominated subjects. Likewise, the research showed firms expect candidates to have 0.5 to 1.11 years of experience to qualify for internship roles. This is a major barrier to entry for candidates who don’t have the connections needed to secure experience (and likely can’t afford to work for free).

By continuing to rely on rigid resumé requirements, insider mentalities and jargon-laden lexicon, VCs are gatekeeping access to the industry and unwittingly locking-in the cycle of poor diversity.

These aren’t hard problems to solve. However, fixing them requires honesty and action on the part of existing VCs and LPs. That means addressing these inequalities by investing in educational and community access programs, embracing anonymized, skills-based hiring, and ensuring teams are consciously looking to create pathways to success for those aspiring to roles in the industry.

By doing this, VCs can ditch the role of gatekeeper and instead embrace a new position as custodians of a fairer, more inclusive venture capital industry.

Eleanor Kaye is the executive director of Newton Venture Program, a joint venture between LocalGlobe VC and London Business School to diversify venture capital. Newton provides access to education and training to people from overlooked and underestimated backgrounds looking to access or accelerate careers in the industry.

Illustration: Dom Guzman